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this tells how a billionaire avoided paying taxes for 14 years due to a oil spill

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Credit: Lisa Larson-Walker/ProPublica and Laila Milevski/ProPublica. Photo by Greg Miles.

Phyllis Taylor's company is responsible for the longest-running oil spill in U.S. history. That's been a disaster for the Gulf of Mexico - but a tax bonanza for Taylor.

After the Deepwater Horizon offshore drilling rig exploded in 2010, environmentalists surveying the damage in the Gulf of Mexico came upon a mystery. The water had oil slicks that, because of the currents, couldn't have originated from the site of the notorious accident.

With the help of satellite imagery, they figured out that oil was leaking from a different spill, a six-year-old disaster the public knew almost nothing about. In September 2004, Hurricane Ivan had swept the legs out from under a 40-story oil-drilling platform operated by a company called Taylor Energy, causing a leak that continues to this day. It is the longest-running - and by one estimate, the largest - U.S. oil spill ever recorded, a contentious saga that prompted a recent "60 Minutes" segment.

It's been an environmental nightmare for the region - but a massive tax bonanza for Phyllis Taylor, the owner of Taylor Energy and the fallen rig.

According to ProPublica's analysis of a secret trove of tax data, from 2005 to 2018, Taylor took in some $444 million in income, most of it from wages, interest, dividends and capital gains, and didn't pay a cent in federal income tax.

That's in significant measure because she was able to transform money her company was compelled to spend cleaning up the oil spill into a perfectly legal nine-figure tax write-off for herself.

Representatives for Taylor, now 80, did not respond to repeated requests for comment.

Taylor is part of a set of ultrawealthy Americans who manage to avoid federal income taxes for years on end by using their businesses or leisure interests to throw off enough deductions to offset the millions or even billions of dollars they make. We've nicknamed the group the biggest losers. Taylor's story shows just how lucrative it can be to be a member of that particular club.

Patrick Taylor, Phyllis Taylor's husband, founded Taylor Energy in 1979. He would eventually become the richest man in Louisiana and enjoyed the sort of lifestyle that went with the title. He raced speedboats on the Mississippi, rode bulls in rodeos and skydived more than 500 times. But he often said he preferred to be known for his role in advocating for the creation of a beloved state program that provided scholarships to Louisiana colleges and universities.

Taylor Energy operated out of an ornate four-story mansion in New Orleans, off Lee Circle, where a statue of Robert E. Lee stood until 2017. Female employees were not allowed to wear pants, and employees addressed their superiors as "sir" or "ma'am." Patrick's office had hand-painted blue-and-white silk wallpaper from a Russian palace, while a nearby dining room featured marble fountains from an 18th-century French chateau. Rooms were named after Ronald Reagan and the British naval hero Admiral Horatio Nelson.

Phyllis cut an unusual figure in the world of brash wildcatters. She started out in the business working for another Louisiana oilman, sometimes being mistaken for his coffee-bearing assistant before he surprised the men in the room by announcing she was his attorney. She married Patrick Taylor in 1964 and served on the board of directors of Taylor Energy while he ran the company.

Deemed the " gentle dove" of Louisiana for her philanthropy, Phyllis Taylor supported local education and art institutions, as well as housing for the homeless. She loved to travel, and in an interview with Condé Nast Traveler, extolled the joys of circumnavigating the world: "The difference between a short cruise and a world cruise is night and day, storm and calm, fleeting thought and thoughtfulness. With an extended cruise you absorb the lifestyle of life at sea; with the great advantage of having a crew and staff that treats you like royalty." A frequent hunter, Taylor proudly displayed the skin and head of a leopard she shot in Zambia.

The year Ivan hit changed Phyllis Taylor's life. A couple of months after the hurricane, her husband died at age 67. At 63, she took over the company.

Deaths create a spectacular tax boon for the wealthy, what some experts consider one of the largest loopholes in the code.

Taylor Energy had ballooned in value in the 25 years since its founding. If Patrick Taylor, who controlled the vast majority of the company, had sold it while he was alive, the Taylors would have owed a huge sum in capital gains tax. But all of that value disappeared at death for the purposes of taxes thanks to a widely decried provision of the code that will cost the U.S. Treasury more than $500 billion in lost taxes over the next decade. Phyllis inherited the company and became the wealthiest woman in Louisiana, worth an estimated $1.6 billion. There's no estate tax for property transferred to a spouse.

In 2008, four years after Taylor Energy became aware of the spill, the company had yet to clean it up. Taylor decided she wanted out of the business. She sold all of the company's oil rigs and other assets, except for the damaged rig, to two South Korean entities. Taylor, who owned about 95% of the company, according to her former CEO, received close to $1.2 billion of the roughly $1.25 billion price tag.

Yet Taylor was legally allowed to portray the sale to the IRS in a very different light - and that in turn depended on the fact that the law allows owners of private companies a lot of leeway in determining the value of their assets. Since Taylor was inheriting the company tax-free, she and her advisors had every reason to assign it a high initial value, because that would mean that when she later sold the assets, the high value would minimize or eliminate the gain on paper. "When property is transferred between spouses at death, there's a tax incentive to aggressively value it on the high end," said Gregg Polsky, a tax law professor at the University of Georgia School of Law, who has been retained as a consultant to ProPublica.

Taylor's tax records suggest that's what happened. Taylor did not record a gain on the sale of her company. In fact, she was able to report a loss of $211 million.

It's difficult for outsiders to value a private company. But a former company insider said Taylor Energy was sold at a premium. "I did the valuation. I know what the assets were worth and know what we sold them for. We did not take a loss. Period," John Pope, Taylor Energy's former CEO, told ProPublica.

The upshot of the claimed loss was that Taylor paid no federal income tax in a year when she realized an enormous gain from the sale. She even got a remarkable extra goodie: refunds on $30 million in taxes she'd paid in previous years.

Paying to Clean Up Her Company's Oil Spill Helped Phyllis Taylor Avoid Taxes for Over a Decade

After the 2008 sale, what was left of Taylor Energy was devoted to one thing only, cleaning up the spill. The company had professed to be trying to plug the leaking oil well but seemed to make no progress.

A few months after the sale, the federal agency that oversees drilling in the Gulf negotiated an agreement that required the company to create a $666 million trust to cover the cost of the cleanup.

That was a lot of money - more than half of the proceeds from the company's sale - but it came with a silver lining. Because Taylor Energy was set up as a sole proprietorship, its income and losses flowed through to Phyllis' personal taxes. She could write off the costs of the cleanup against her own income.

It may be surprising that the costs of cleaning up an environmental disaster are tax-deductible. But such write-offs are legal, qualifying as "ordinary and necessary" business expenses. By contrast, fines and penalties are not deductible. Oil giant BP was able to deduct most of the settlement it reached with the government over the Deepwater Horizon spill because much of it went to address the environmental calamity, rather than to penalties for wrongdoing.

Such deductions are unobtainable for executives or shareholders at publicly traded corporations, where only the company gets to deduct the expenses.

It took years for the extent of the spill to become known. Taylor disclosed almost nothing about the accident and fought public records requests. The reality unspooled thanks to the persistence of environmental groups, investigative reporting, and revelations from a dizzying array of suits and countersuits.

In the years after it established the cleanup trust, Taylor Energy claimed that it could not have foreseen such an accident and that stopping the leak was technologically impossible. In 2012, the Coast Guard finally ordered Taylor to install a dome to contain the leak, but three years later, when Taylor Energy settled a lawsuit that forced it to start publicly disclosing more about its efforts, the company had not even finished the design.

According to a later review by the Coast Guard, Taylor Energy was "obstinate, difficult to deal with and verbally combative," and preferred "to employ stall tactics over cooperation with an intention to confuse, delay or misdirect" the government.

In 2015, The Associated Press revealed that both Taylor and the government had dramatically underestimated the volume of the leak. The Coast Guard released a new estimate, much higher than its previous ones and 20 times the roughly 4 gallons a day Taylor was claiming. In a lawsuit, a federal expert put it higher still, estimating the spill to be up to 29,400 gallons a day. That would mean that starting in 2004, more oil spilled into the Gulf from Taylor Energy's rig than the estimated 130 million gallons that gushed into it as a result of BP's Deepwater Horizon catastrophe.

For more than a decade, Taylor Energy has launched a series of legal actions against the government to try to recoup at least a portion of the money in the trust or to end its cleanup obligations, saying it has done all that it could. The company has come up empty every time. Rather than put resources into fixing the problem, Taylor has been "putting all of its money and efforts into fighting the cleanup," said Brettny Hardy, a senior attorney for Earthjustice, an environmental group.

Today the oil is still flowing at a rate of about 1,000 gallons a day. A protective dome, finally installed by a contractor the Coast Guard hired after losing faith in Taylor, contains the leak.

Taylor has weathered all of this remarkably well. She remains known as a great benefactor to her city and state. Praising her philanthropy, the U.S. Marine Corps gave her honorary marine status in 2013, and The Times-Picayune granted her its "Loving Cup" award in 2016.

The combination of the loss on the sale of the company and the expenses from the cleanup meant Taylor did not pay any income taxes from 2005 through 2018. At the end of 2018, her reserve pool of losses exceeded $330 million, making it a distinct possibility that she would never have to pay income taxes again.

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A Massive Oil Spill Helped One Billionaire Avoid Paying Income Tax for 14 Years

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Phyllis Taylor's company is responsible for the longest-running oil spill in U.S. history. That's been a disaster for the Gulf of Mexico - but a tax bonanza for Taylor. After the Deepwater Horizon offshore drilling rig exploded in 2010, environmentalists surveying the damage in the Gulf of Mexico came upon a mystery.

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this talks about how the U.S. tax system has made it easy for the ultrawealthy to harvest business deductions without limit

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Credit: Lisa Larson-Walker/ProPublica and Laila Milevski/ProPublica

Thoroughbred horses, auto racing, massive ranches, luxury hotels. The hobbies and side businesses of the ultrawealthy create huge write-offs that can let them get away with paying little or no income tax for as much as a decade at a time.

When the Kentucky Derby allowed spectators to return this spring, after the pandemic had curtailed attendance in 2020, the mood was euphoric. Under cloudless skies, ladies swanned about in colorful broad-brimmed hats and gentlemen donned seersucker suits, the trademark pageantry of the sport of kings.

The sport's royalty, including the billionaire owners of thoroughbreds, was well represented. Basking in the glory of their racehorses' appearance on the most prestigious stage in the world, they knew all but one of them would see their colt or filly suffer defeat. A victory would bring not only a seven-figure purse, but possibly also tens of millions of dollars in breeding rights over years to come.

Even if their horses finished far out of the money, some owners had a salve for the sting of defeat: tax write-offs. Six of the 20 thoroughbreds selected to run in this year's Derby were owned by ultrawealthy Americans whose horse-racing operations have produced a combined $600 million in losses that they could use to offset their federal taxable income, according to ProPublica's analysis of IRS data.

Among them was Paul Fireman, who made his fortune by turning the shoe company Reebok into a household name before selling it to Adidas in 2005 for $3.8 billion. Fireman was new to the endeavor, but he'd already spent millions building a professional horse-racing operation, including dropping almost $1 million on a single thoroughbred, a descendant of a Preakness winner. His horse, King Fury, was scratched from the Kentucky Derby after spiking a fever.

Charlotte Weber, a Campbell Soup heiress who Forbes says is worth $1.6 billion, saw her appropriately named horse Soup and Sandwich break well from the outside before faltering with a breathing issue and finishing last. Brad Kelley, who made his money selling his tobacco company two decades ago and is worth $2.7 billion, owned Bourbonic, who finished 13th. Hedge fund manager Seth Klarman, worth $1.5 billion, entered a horse named Highly Motivated that would place 10th.

The tax records obtained by ProPublica shed light on how much each of these owners was able to write off. Over 16 years, Kelley claimed $189 million in losses for his racing business; Weber claimed $173 million in 21 years, and Klarman $138 million over 19 years. Fireman, a relative newcomer to the game, had taken only $9.3 million in losses as of 2018. (Kelley and Weber did not respond to requests seeking comment. Klarman, who has donated to ProPublica in the past, declined to comment.)

All Americans are entitled to life, liberty and the pursuit of happiness. But the happiness of the wealthy can come with an added bonus: It's subsidized by taxpayers. Billionaires can not only deduct the costs of buying, owning and training thoroughbred horses, but they can treat all manner of pastimes and side pursuits as businesses, and then tap those businesses as an extra source of deductions. By contrast, if you're a middle-class person with a passion for thoroughbreds and you attend the Kentucky Derby, neither the money you spend on your ticket to sit in the grandstand nor, say, the $20 you blow in bets would help you lower the taxes you owe on your wages.

A trove of tax data obtained by ProPublica reveals for the first time the extent to which tax breaks underwrite the enjoyment of our richest citizens. Yesterday, ProPublica examined a special class of superrich taxpayers we called the biggest losers, who amass deductions to such an extent that they can avoid income taxes for years on end. We showed that many of these tax avoiders are titans in commercial real estate or oil and gas, industries on which the tax laws bestow unusually lucrative advantages.

Today we're focusing on a broader set of strategies the ultrawealthy use to pile up deductions. Tax records show these loss producers go beyond the classic hobbies and encompass all sorts of businesses the rich control.

Sometimes, they plow funds into pet projects that lose money so consistently that it suggests profitability isn't the main goal. The wealthy may not start these businesses chiefly as a way to reduce taxes - many billionaires would happily race horses even without a tax payoff - but the benefits flow in just the same.

In some cases, the deductions from money-losing businesses have allowed a handful of people to avoid paying taxes for years. Ty Warner, creator of the Beanie Baby toy, lost so much money on his side business - luxury hotels and resorts - that he went 12 years without paying a dollar in federal income taxes. Dr. Patrick Soon-Shiong, who built his $7.1 billion fortune by selling two drug companies, oversees an array of businesses that have produced tax losses, including the Los Angeles Times, which he bought in 2018. He hasn't paid federal income tax in five consecutive recent years.

These feats are possible because the U.S. tax system has made it easy for the ultrawealthy to harvest business deductions without limit. There are rules they must navigate, the result of almost 80 years of congressional efforts to rein in what lawmakers viewed as abuses. These rules include limits on the deductibility of hobbies and provisions to discourage investments that produce tax-reducing losses year after year. But these measures have proven far more effective at preventing the merely affluent from deducting losses than they have at stopping the ultrawealthy from doing so.

"The rules are like penicillin: It's still effective sometimes, but there are some people who are resistant," says Brian Galle, a former tax prosecutor who teaches tax law at Georgetown. "The well-advised, wealthy individuals have figured out ways around them."

In the early 1940s, Congress made its first strong bid to stop the wealthy from claiming endless deductions from their personal businesses. The law came in the wake of widely publicized congressional hearings in 1937 that focused, in part, on tax avoidance through horse breeding and racing. Lawmakers targeted Marshall Field, the wealthy department store operator, because he had taken substantial tax deductions on his money-losing newspapers. (Conservatives pushed that effort, upset with the left-wing bent of Field's Chicago papers.)

The line drawn was simple: After five straight years of losses, further tax deductions would be sharply limited. A real business exists to make money, the lawmakers reasoned, and after a certain point, it's obvious that profit isn't the point.

But the five-year rule was easily gamed - four years of huge losses and one year of tiny profit did the trick - and eventually it was dropped. Congress decided on a more subjective approach. In 1969, a new law took aim more specifically at "hobby losses." That law is largely intact today.

Under the hobby loss rule, a pursuit is defined as either a hobby or a for-profit endeavor. To qualify as a bona fide business, an activity needn't actually turn a profit. "It does not matter that profitability is improbable, it just has to be sincerely pursued," as one accountant, Peter Reilly, put it.

Taxpayers decide for themselves whether they are engaged in a hobby. Only if they are audited will that decision be questioned, and to disallow any iffy deductions, the IRS must engage in a complex act of mind-reading. Using a nine-factor set of guidelines (including "elements of personal pleasure or recreation" and "the expertise of the taxpayer or his or her advisers") the agency must establish that a taxpayer is not engaged in a genuine attempt to make money.

When an activity turns a profit in three of five years, the odds shift even further in the taxpayer's favor. Then the IRS must presume it's a genuine business and the agency bears the burden of proving otherwise. The standard is actually more lenient for taxpayers involved in the very activity that spurred authorities to crack down in the first place: horse racing. There, showing profit in two of seven years is enough to shift the burden of proof.

Despite these obstacles, the IRS often wins the few audits that make it to court - but those victories come far more easily in smaller cases.

For the ultrawealthy, it's easier to clear the IRS' hurdles. Tax professionals advise clients that they can be bold in taking losses, as long as they take some careful steps first: The business should generate some revenue and the books should be kept by professionals. In horse racing, a whole system of consultants, trainers and jockeys are ready to turn a hobby into a professional venture for the ultrawealthy. And race purses, even if victories are rare, provide revenue.

ProPublica found plenty of examples of billionaires who appear undaunted by the hobby loss rule. The tax records of both Kelley, the tobacco billionaire, and Weber, the soup heiress, show losses for at least 16 straight years, with their horse racing entities never once turning a profit. Other owners of horses in the Derby showed similar streaks.

The IRS' inspector general has repeatedly faulted the agency for not being aggressive enough in enforcing the rule. In its most recent effort in 2016, the office wrote that the agency generally fails to look for high earners who are writing off hobby losses and that even "when returns containing potential hobby losses are selected for audit, the examiners do not always address the hobby loss."

Even if the hobby loss rule were aggressively enforced, however, it covers only one aspect of how the wealthy can use their fortunes to generate tax deductions from their businesses. ProPublica previously highlighted how they can reap large losses from buying a sports team, for instance. The ultrawealthy often sit atop a number of businesses that provide them with enormous deductions.

Fireman, for instance, has a couple of tax-losing leisure activities that have traditionally been scrutinized as possible hobbies. In addition to his horse-racing operation, he also owns the Winecup Gamble Ranch, which occupies almost a million acres, about 58 miles across, in northeast Nevada. Once owned by the actor Jimmy Stewart, Winecup Gamble says on its website that it's "devoted to being a profitable cattle ranching operation." But from 2003 through 2018, it delivered $22 million in tax losses to Fireman without a single year of profit.

Fireman hasn't spent all his time on horse racing and cattle ranching. He also used his fortune to launch upscale real estate projects, including golf courses, as well as a country club and a residential development on Cape Cod. These have allowed him to tap into the tax benefits enjoyed by real estate professionals.

From 2008 through 2017, because of the deductions from his various businesses, Fireman was able to entirely offset $360 million in income. He paid nothing in federal income taxes in eight of those years.

Paul Fireman Made Millions, but His Losses on Horse Racing and Other Activities Often Spared Him From Having to Pay Federal Income Taxes

Fireman declined to comment.

In theory, there's a limit to how many businesses an ultrawealthy person can reap massive deductions from. Taxpayers can use their businesses' losses to offset all other kinds of income only if they "materially" participate in the company. They must play a key role running the business.

Of course, just as with hobbies, this is subjective, and to decide the matter, the tax code has another set of conditions (this time there are seven). The clearest requirement is that the taxpayer spend at least 500 hours on the activity during the year. Since 40-hour weeks add up to around 2,000 working hours in a year, a taxpayer could theoretically actively run only four businesses, or perhaps one or two more if they put in longer hours.

Yet some taxpayers have far more. With Patrick Soon-Shiong, the 89th-wealthiest American, it's hard to keep track.

The billionaire is far from passing his retirement quietly. In 2016, he announced an ambitious initiative to revolutionize the hunt for a cancer cure, entitled the " Cancer Moonshot 2020." In 2018, like Marshall Field before him, he bought newspapers, in Soon-Shiong's case, the Los Angeles Times and The San Diego Union-Tribune.

More recently, he's been holed up in his compound, according to a New Yorker profile, overseeing an effort to find an innovative vaccine for COVID-19. That article explored his working on finding cancer cures, developing vaccines and saving newspapers, but also raised questions about his financial dealings. Soon-Shiong defended his conduct as appropriate in the article.

Soon-Shiong is pursuing many other business endeavors. He continues to own biotech companies. He also owns a health care information effort, a zinc-air battery developer, a bioplastics operation, a water purification company, a production soundstage and an urban scooter offering, among other outfits.

These businesses have provided write-offs that have canceled out the $887 million in income, most of that from interest, dividends and capital gains, that Soon-Shiong has received since 2013, letting him report huge losses to the IRS.

Some of the write-offs come in bulk, as in 2018, when he received a $178 million loss from the entity that houses his newspapers. Other businesses have dribbled out tens of millions in losses over a series of years.

Soon-Shiong reported negative income for six straight years from 2013 through 2018. That enabled the billionaire doctor to pay no federal income tax from 2013 through 2017. In 2018, he paid $158,000. By the end of 2018, he still had over $400 million in accumulated losses that he could use to offset income in future years, ProPublica estimates.

Soon-Shiong did not respond to repeated requests for comment.

If Soon-Shiong was not "materially" participating in his businesses, his ability to offset other types of income would be curtailed. Losses from "passive" activity, as the tax code puts it, can be used to offset only other passive business income. That would prevent Soon-Shiong from, say, using passive business losses to offset his wages or personal investment income.

The ProPublica tax records don't make clear which specific business lines Soon-Shiong materially participated in. But the vast majority of his losses were not passive.

In reality, no hard ceiling exists on how many businesses an ultrawealthy person can claim to actively run. One way around the "material participation" rule is to argue that what appear to be a number of separate businesses are actually all aspects of a single activity. In Soon-Shiong's case, many of his businesses, even though they are discrete operations in different sectors, are organized under a holding company. To decide what's an appropriate "grouping" of businesses, the tax code offers another multifactor (it's five this time) test. Because the test is "quite flexible in how it applies," said William Kostak, a former IRS attorney, "for the IRS to raise that issue would be an uphill battle." That means taxpayers can be bold in claiming deductions from an array of businesses.

If average Americans wanted to invest in such a variety of businesses, they'd have to buy shares in mutual funds or a bunch of stocks. When such investments result in net losses, the deductions are sharply limited. They can be used to offset no more than $3,000 a year in wages and other noninvestment income.

As Soon-Shiong waited for one of his startups to strike gold, the losses on many of his businesses were deductible on his taxes, without being subject to such limits. And, as ProPublica has shown in other articles in this series, if one of his businesses hits it big, he'll have all sorts of mechanisms he can use to avoid taxes. Either way, the government may get nothing.

Business moguls Ty Warner and Kevin Kalkhoven have learned through painful experience how to - and how not to - avoid the taxman legally. Early in their existences as multimillionaires, each tried a strategy that would later land them in trouble.

For Warner, it started with a Swiss bank account, which he opened in 1996, just as Beanie Baby mania was beginning to hit. Such accounts are legal, but only if they're reported to the IRS. Warner didn't report the account, whose balance eventually exceeded $100 million. When the bank agreed to disclose its American customers, Warner moved his money to another Swiss bank and put it in the name of a fake Liechtenstein charity. In 2013, he pleaded guilty to evading about $6 million in taxes between 1996 and 2007. Warner was fined $54 million and sentenced to two years' probation (despite prosecutors' requests that he serve time in jail).

For Kalkhoven, the trouble stemmed from tax shelters. He made his fortune as CEO of the onetime stock darling JDS Uniphase, a telecom equipment concern whose stock was crushed, not long after he departed, in the dot-com crash of 2000. Kalkhoven used a kind of shelter that the government eventually deemed to be fraudulent. A federal court would later determine that Kalkhoven and his fellow participants in one shelter invested $16.5 million and got nearly 20 times that investment - $3.1 billion - in artificial losses in return. Major accounting firms were criminally prosecuted, but Kalkhoven was not charged with any wrongdoing.

Kalkhoven has maintained that he relied on advice from his accountants. His lawyer did not respond to a detailed list of questions for this story.

In 2004, the IRS began auditing his 2000 and 2001 returns and eventually sought money back from him over the shelters. That battle continues today.

Even as the consequences of these early steps slowly unfurled, Kalkhoven and Warner became adept at legal tax avoidance.

Warner's biggest success at limiting his taxes began in 1999, the same year he made his debut on Forbes' list of wealthiest Americans. That's when he bought the Four Seasons hotel in midtown Manhattan for $275 million. Next came the Four Seasons in Santa Barbara for $150 million. His luxury portfolio grew from there: exclusive resorts, country clubs and golf courses.

Warner's new side gig as an upscale developer provided him with a range of benefits. There was, of course, the glamour of owning landmark properties, hosting celebrities and presiding over galas. Warner wanted his properties to recapture a lost, opulent past. When, in 2008, after extensive renovations, he reopened the Coral Casino Beach and Cabana Club (memberships started at $250,000) across the street from his Santa Barbara Four Seasons, Warner saluted the time when Marlon Brando and Errol Flynn were regulars there. Legendary for his obsessive involvement in every detail of Beanie Babies, Warner became similarly fixated on his luxury properties. At one hotel, he invented the swimming pool's iridescent tiles, which he called "tyles," a play on his first name.

Then, of course, there were the tax advantages. Warner took out huge loans against his properties, then deducted the interest costs. He also wrote off his purchases and renovations over time, using deductions for depreciation that treat the properties as losing value for tax purposes even if they gained value in the real world. Those deductions were so large that they offset the income spun off by his properties, his profitable toy business and his personal investments.

Warner's tax records show that the Santa Barbara Four Seasons, the focus of his most extensive renovations, lost money in 16 of the 18 years between 2002 and 2019. But those losses provided a huge tax boon for Warner: a total of $219 million in deductions during that period.

For 12 consecutive years starting in 2004, Warner paid nothing in federal income tax, as the deductions from his luxury properties helped to offset about $363 million in income. In more recent years, the increasing profitability of Warner's toy company finally pushed him into the black on his tax returns. From 2016 through 2018, Ty Inc. sent a total of $228 million to Warner, but even that wasn't enough to result in a significant tax burden for the billionaire. In total, Warner paid less than $1 million in income tax over the three years.

Beanie Babies Made Ty Warner a Billionaire. His Hotel Losses Often Saved Him From Having to Pay Federal Income Taxes.

Representatives for Warner, who is worth about $4.5 billion, did not respond to repeated requests for comment.

For his part, Kalkhoven learned to take deft advantage of money-losing side businesses similar to horse racing, though he preferred cars and airplanes to thoroughbreds. Kalkhoven became one of the owners of the ChampCar league and founded an auto racing team that would go on to win the Indianapolis 500. In 2004, he purchased a high-tech auto parts company called Cosworth.

He also owned companies whose main assets were his jets. Kalkhoven would joke about living in the ZIP code of "N-one-four-four-kilo-kilo," the tail numbers of his Gulfstream. (He liked to trade them in every few years.) On board, according to Racer magazine, he hosted junkets for journalists where he served "Moscow martinis" - a thumbful of caviar washed down with vodka.

His car-racing team, his auto-parts company and his aviation operation all helped produce losses for tax purposes.

In 2005, Kalkhoven began a remarkable streak of losing money. From that year through 2018, he reported losses in 13 of 14 years. He paid federal income taxes in only two of those years, and even then he paid just about $422,000, according to ProPublica's data. In that time, he brought in $264 million, mostly in capital gains and interest income.

As this was happening, the IRS case stemming from Kalhkoven's turn-of-the-millennium tax shelters was making glacial progress. It reached a critical point this summer when the agency took the unusual step of freezing his assets, which Kalkhoven has decried and is fighting in court. The agency is seeking $350 million in back taxes, interest and penalties.

The federal government recently argued in court that it had to take the drastic step of freezing Kalkhoven's assets because he appeared to be on the brink of insolvency. Government lawyers pointed out that "he now appears nearly broke in the United States: he has paid no significant federal income tax for over 15 years and has even claimed the recent federal stimulus meant for individuals struggling during the pandemic."

The prosecutors' move forced Kalkhoven's lawyers to argue that, whatever their client's tax returns might show, Kalkhoven was not on the verge of going belly up. The executive's lawyer said just one of Kalkhoven's assets was "large enough by itself to put to rest any speculation that Mr. Kalkhoven's financial situation was imperiled." It was silly to think, the statement seemed to suggest, that not paying taxes for a decade means a person has no money.

Help Us Report on Taxes and the Ultrawealthy

Do you have expertise in tax law, accounting or wealth management? Do you have tips to share? Here's how to get in touch. We are looking for both specific tips and broader expertise.

I may know something related to your investigation. Submit a Tip Through Our Form We take privacy seriously. Any tips you submit via the above form are encrypted on our end. But if you wish for additional anonymity, please get in touch via one of these methods:

I am knowledgeable in one of these areas and can answer questions or help you understand technicalities. Volunteer Your Expertise

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When You're a Billionaire, Your Hobbies Can Slash Your Tax Bill

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Thoroughbred horses, auto racing, massive ranches, luxury hotels. The hobbies and side businesses of the ultrawealthy create huge write-offs that can let them get away with paying little or no income tax for as much as a decade at a time.

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this discusses how nearly 500 people became billionaires during the pandemic

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Covid-19 hasn't stopped the spread of billionaires, who multiplied at an astounding rate over the past year. A record 493 people joined Forbes' World's Billionaires list this year-meaning the world on average gained a new billionaire every 17 hours since Forbes last took a snapshot of billionaire wealth on March 18, 2020. The previous record for most new billionaires in a year was 290 in 2015.

The average net worth of these 493 newcomers: $2 billion. Their average age: 54 (vs. 63 for the overall list of 2,755 billionaires). A full 84% of them are self-made billionaires, who founded their companies rather than inherited them (vs. 72% for the overall list).

No country put more names on the Forbes list this year than China, which gained 205 new billionaires. Notable Chinese newcomers include its richest newcomer, 45-year-old Chen Zhiping (worth $15.9 billion), who is chairman and CEO of vaping device-maker Smoore International, and Kate Wang ($5 billion), CEO of Chinese vaping company RLX Technology. At 39, she is one of the world's youngest self-made female billionaires.

The United States has the second highest number of newcomers, with 98. That includes famous faces like Kim Kardashian West ($1 billion), whose beauty and shapewear empire pushes her over the ten-digit mark; Hollywood mogul Tyler Perry ($1 billion); and Apple CEO Tim Cook ($1.3 billion). The richest newcomer is also an American: Miriam Adelson, who is worth $38.2 billion after inheriting the gambling empire built by her late husband, Sheldon Adelson, who died in January.

Germany added the third most billionaires this year, with 26, followed by Canada and India, with 19 apiece. In all, 36 countries have at least one new billionaire this year.

The youngest fresh face on the list is Kevin David Lehmann ($3.3 billion), heir to Germany's leading drugstore chain, dm-drogerie markt. He is just 18 years old. The youngest self-made billionaire to join the billionaire ranks this year is Austin Russell ($2.4 billion), the 26-year-old founder of laser lidar startup Luminar, which makes sensors that help self-driving cars see in 3D.

Russell is one of ten new billionaires who have gotten super-rich cashing in on the SPAC boom over the past year. Short for "special purpose acquisition companies," SPACs are blank check companies that go public in search of a private company to acquire and thus take public. Russell merged Luminar with a SPAC in December 2020. Other newcomers include serial SPAC sponsors Chamath Palihapitiya ($1.2 billion) and Bill Foley ($1.9 billion).

Others created new wealth an old fashioned way: by taking their companies public through a traditional IPO. Whitney Wolfe Herd ($1.3 billion) took Bumble, the woman-centric dating app she cofounded in 2014, public on the Nasdaq in February-becoming the world's youngest self-made female billionaire at age 31. The richest new woman on the list also debuts after an IPO. Pan Dong, who chairs laundry detergent maker Blue Moon Group Holdings, took her company public in Hong Kong in December. She's worth $8.3 billion.

Then there are the crypto billionaires. With cryptocurrencies booming yet again-Bitcoin skyrocketed 800% between mid-March 2020 and mid-March 2021, while Ripple's XRP rose 200%-nine new members of the three-comma club have emerged. The richest is 29-year-old Sam Bankman-Fried, who has amassed an $8.7 billion fortune as the founder of two crypto firms. His quantitative trading firm Alameda manages $32 billion in Bitcoin, other major cryptocurrencies and other derivatives. He also founded the FTX exchange, which achieved unicorn status in January 2020, less than a year after its launch. Most of his wealth is tied up in FTX's equity and its FTT tokens.

Other notable crypto billionaires include Silicon Valley scion Tim Draper-whose purchase of $18.7 million worth of Bitcoin confiscated by U.S. Marshals from the shuttered Silk Road black market in 2014 is now worth $1.5 billion (as of March 2021)-and Cameron and Tyler Winklevoss ($3 billion each), who famously used some of their settlement with Facebook to snatch up Bitcoin in the early days. The twin brothers own an estimated 70,000 Bitcoin, plus the crypto exchange Gemini, which processes about $200 million a day in trades.

Another route to riches that was especially lucrative during the pandemic year: healthcare. Forbes found 61 new billionaires from the healthcare field this year-and at least 40 join the ranks thanks to their involvement in the global fight against the Covid-19 pandemic. That includes Sergio Stevanato ($1.9 billion), an Italian billionaire whose family-owned Stevanato Group produces many of the glass vials used to house Covid-19 vaccines. He stepped down as CEO of the business in 2010, but still owns a 68% stake and is chairman emeritus. His son Franco is executive chairman.

Other new healthcare billionaires on the Covid frontlines include Prathap Reddy ($1.5 billion), an Indian billionaire doctor whose hospital chain has seen a doubling of its stock price amid a shift to focusing on treating and diagnosing Covid-19; Uğur Şahin ($4 billion), the Turkish-born physician who cofounded German firm BioNTech, which developed a vaccine in partnership with Pfizer; Stéphane Bancel ($4.3 billion), the French CEO of U.S.-based firm Moderna, which had its Covid-19 vaccine approved in the U.S. in December-plus two of the company's cofounders and one of its early investors.

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Nearly 500 People Became Billionaires During The Pandemic Year

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Covid-19 hasn't stopped the spread of billionaires, who multiplied at an astounding rate over the past year. A record 493 people joined Forbes' World's Billionaires list this year-meaning the world on average gained a new billionaire every 17 hours since Forbes last took a snapshot of billionaire wealth on March 18, 2020.

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this discusses the term self made billionaires and how misleading that term really is

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They are 2,775 billionaires in the world

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An abundance of material resources

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abundance of valuable material possessions or resources; abundant supply : profusion; all property that has a money value or an exchangeable value… See the full definition

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This video gives arguments for why (or why) billionaires are evil.

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What Is Wealth Inequality? | Velshi & Ruhle | MSNBC

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Haben-Photographer Shows Wealth Inequality Through Aerial Pictures

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Haben-Photographer Shows Wealth Inequality Through Aerial Pictures

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In 2016, Johnny Miller started taking drone photos in South Africa to highlight the wealth inequality he saw around him. I found this approach interesting because it literally demonstrates what wealth inequality looks like. In this world, one person could be throwing away perfectly good leftovers while someone a mile away is starving.

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When we first brought you Johnny Miller's Unequal Scenes, the photographer was using aerial photography to highlight wealth disparity in South Africa. Now, he's branched out to countries around the globe, using a drone to call attention to the income differential that often sees new tennis courts adjacent to abandoned lots.

Since 2016, Miller has captured around 100 photographs in South Africa, India, Tanzania, the United States, and Kenya. The project was born from Miller's time in South Africa, where he moved to study for a master's degree in anthropology. Startled by the tin shacks he saw around him, which give way to affluent neighborhoods, he began using his camera to force people not to turn away from issues of wealth inequality.

"The images that I find the most powerful are when the camera is looking straight down-what's known as 'nadir view,' looking at the actual borders between rich and poor," Miller tells My Modern Met. "Sometimes this is a fence, sometimes a road, or wetlands-with small shacks or poor houses on one side, and larger houses or mansions on the other. Whatever it is about the composition of those photographs, they are extremely powerful to people. I think the images make inequality relevant-people can see themselves reflected in the images, and it's deeply unsettling."

Miller, who works with DJI and Hasselblad, is dedicated to aerial photography for its ability to provide emotional distance in his photos. This allows viewers to pull back and truly take in the details, and meaning, of the scene before them. Most recently, Miller shot with a DJI M600Pro mounted with a Hasselblad A6D 100megapixel camera. These images will be exhibited in selected cities later in the year.

Shooting Unequal Scenes is quite labor intensive, with Miller putting in a lot of research to find locations. At times this means scouring Census records and slum maps, at other times it requires relying on local advice. Once Miller identifies the areas he wants to photograph, he charts a flight path on Google Maps. Still, as he's usually on his own, there is a lot of think about.

"Shooting in dangerous cities and informal settlements often means you are highly aware of your surrounding environment, your personal safety, and the actions you are having on the community around you," he shares. "When you have official support, it can be a fun, even rousing atmosphere-like in Kibera, Kenya, where we were surrounded by dozens of people cheering at the drone rising into the sky. When you are on your own, it can be much more challenging and even scary."

Through his photography, Miller has not only carved a creative path but found a larger purpose. His NPO, africanDRONE, helps empower African storytellers in the pursuit of drone journalism. And as he continues Unequal Scenes, Miller continues to bring important social and economic issues to light.

In 2016, Johnny Miller started taking drone photos in South Africa to highlight the wealth inequality he saw around him.

Now, he's bringing Unequal Scenes around the world to open the public's eyes about an issue that may be uncomfortable for some.

"I think the images make inequality relevant-people can see themselves reflected in the images, and it's deeply unsettling."

Miller hopes his work will spark conversations.

"Through these conversations we can begin to understand the scope of the problem, and through that understanding, we can develop solutions."

My Modern Met granted permission to use photos by Johnny Miller.

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Shocking Aerial Photos Highlight Wealth Inequality in Cities Worldwide

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When we first brought you Johnny Miller's Unequal Scenes , the photographer was using aerial photography to highlight wealth disparity in South Africa. Now, he's branched out to countries around the globe, using a drone to call attention to the income differential that often sees new tennis courts adjacent to abandoned lots.

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A billionaire is a person with a net worth of $1,000,000,000,000 (1 billion dollars) or more.

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This website describes the growth of billionaires' wealth over the past few decades and during the pandemic. It has interesting data to look at.

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Alongside Elon Musk and Jeff Bezos, who are the richest people in the U.S.? This map reveals the wealthiest billionaire in each U.S. state.

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Mapped: The Wealthiest Billionaire in Each U.S. State in 2021

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Add pictures, video, links, etc... about the topics of billionaires, wealth, wealth inequality, etc...

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Add pictures, video, links, etc... about the topics of billionaires, wealth, wealth inequality, etc...

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